Will Aubrey McClendon Survive, and could Chesapeake survive without him

[The Profit]

Something new pops up everyday about Chesapeake and McClendon. As highly invested as this company is in Oklahoma City, it would be devastating if this company went down.

[okie52]

Something new pops up everyday about Chesapeake and McClendon. As highly invested as this company is in Oklahoma City, it would be devastating if this company went down.

Yes, it would devastating for OKC if Chesapeake went down. Chesapeake would survive without him but certainly wouldn't be the same company.

[sooner_born_1960]

It'll really be a shame if his shinanigans bring down Chesapeake.

[okie52]

It'll really be a shame if his shinanigans bring down Chesapeake.

I don't think it will bring down Chesapeake but it may bring down Aubrey if the investigations turn up something incriminating. I give the guy credit though, there wouldn't be much at Chesapeake if it wasn't for him.

[yermom]

what are the shenanigans? i haven't been following this at all

[REDREX]

Yes, it would devastating for OKC if Chesapeake went down. Chesapeake would survive without him but certainly wouldn't be the same company.----It is a different skill set to run a company than to build one

[OULenexaman]

Enron comes to mind....

[okie52]

----It is a different skill set to run a company than to build one

Yeah, I'm sure it is but Aubrey has been very cutting edge on many of his ventures....most of them I understand that he has sold parts of off have left Chesapeake getting carried on the drilling costs. I think his main problem was he tried to stay with just NG for too long. He really didn't start shifting to oil until late 2009-early 2010.

[okie52]

Enron comes to mind....

Nahh, I don't think you will see anything like Enron...probably just some poor judgement on Aubreys part about the hedge fund and his personal WI's in Chesapeakes wells. The WI's were never a secret. I don't know about the hedge fund though. Supposedly Ward was in it with him.

[Midtowner]

I'm still not sure how anything McClendon has done here is actually illegal. It's pretty SOP these days for contracts with top level management to exclude things like the duty of loyalty. So long as this was all above board with the Board of Directors, corporations have ridiculously wide latitude in how they want to spend their money and compensate their executives. In my opinion, now is a really good time to buy CHK stock, because assuming the company can manage its cash flow issues (which are not insignificant), it'll weather this storm nicely.

[okie52]

I'm still not sure how anything McClendon has done here is actually illegal. It's pretty SOP these days for contracts with top level management to exclude things like the duty of loyalty. So long as this was all above board with the Board of Directors, corporations have ridiculously wide latitude in how they want to spend their money and compensate their executives. In my opinion, now is a really good time to buy CHK stock, because assuming the company can manage its cash flow issues (which are not insignificant), it'll weather this storm nicely.

I've had a number of friends buying CHK in the last week.

I don't know if Aubrey did anything illegal...just poor appearances for the public consumption. It seems all of this broke when it was announced Aubrey got a 1.1 Billion dollar personal loan against his personal WI's. Again, it was no secret about those WI's but it seemed to create a firestorm....so much so he resigned as Chairman.

[diverdog]

I don't think it will bring down Chesapeake but it may bring down Aubrey if the investigations turn up something incriminating. I give the guy credit though, there wouldn't be much at Chesapeake if it wasn't for him.

One of my old fraternity brothers and friend at the time (haven't seen him since college) is really high up in the structure of Chesapeake. He is CEO of Chesapeake Midstream Partners LP. I remember he was a super nice guy and an extremely hard worker. Hope they make it through all this turmoil because it is a great company.

[Midtowner]

....so much so he resigned as Chairman.

I think that was a mistake. That almost looks like an admission of malfeasance. For the sake of the state, I really don't want anything to happen to the makeup of the BOD. It seems safe to say that it would be very resistant to a takeover, and I believe they have staggered terms, so a takeover isn't likely. With its biggest shareholders clamoring CHK to not ignore offers to purchase the company, I think the way the BOD is set up is going there are plenty of good defenses available to a hostile takeover and as far as buyers are concerned, I think the BOD would be absolutely insane to sell anywhere near the current stock price.

[Bourbon St Sooner]

Enron comes to mind....

Not even close. They've got a terrible corporate structure and need to bring in more independent directors. They actually have assets though, unlike Enron and high quality assets at that. I don't think Chesapeake will go under but with their low stock price they definitely could be a takeover target.

[okie52]

I think that was a mistake. That almost looks like an admission of malfeasance. For the sake of the state, I really don't want anything to happen to the makeup of the BOD. It seems safe to say that it would be very resistant to a takeover, and I believe they have staggered terms, so a takeover isn't likely. With its biggest shareholders clamoring CHK to not ignore offers to purchase the company, I think the way the BOD is set up is going there are plenty of good defenses available to a hostile takeover and as far as buyers are concerned, I think the BOD would be absolutely insane to sell anywhere near the current stock price.

I think Aubrey stepping down did look bad...he should have waited until much of the turmoil has blown over. The largest shareholder is out of Atlanta (I can't remember their name) but they wouldn't be like an Exxon taking over and moving them or absorbing them into their E&P departments.

[Midtowner]

It should also be noted that shareholder suits, while often meritorious, typically end with a settlement and no admission of anything, or they're just dismissed altogether. Businesses have a very wide latitude in what they can do with their money. The fact that lawsuits exist out there doesn't necessarily mean anything inappropriate happened. McClendon does have a sullied reputation since he did lose a shareholder's lawsuit which forced him to disgorge some of his compensation.

[REDREX]

Shareholder lawsuits happen all the time------If Chesapeake were to lose their banking relationships due to his actions that is a much bigger problem

[The Profit]

This little article from last night worried me. I believe there is enough to the Chesapeake structure that it will survive or be purchased by another entity. McClendon, though, is the very visible face of the company, and I am not certain that he survives. I have read where investors are talking about a class-action lawsuit, which could change the entire game.

Moody's Investors Service lowered the outlook Wednesday from stable to negative citing a large funding gap within the company. The service also says Chesapeake is vulnerable because of further declines in natural gas and the fact that it is facing scrutiny because CEO Aubrey McClendon has stepped down as the company's board chairman.

[OULenexaman]

prolly lot's of office gossip on the Chesapeake Campus....

[okie52]

I know quite a few CHK people...some fairly high up. I don't get any sense of panic with them. They are disturbed about the issues and the possible distractions it could cause, but not really worried about CHK being bought or going down.

Of course, sometimes they could be the last to know.

[Petro-Sooner]

The evil empire....... Screw'em!

[OULenexaman]

I know quite a few CHK people...some fairly high up. I don't get any sense of panic with them. They are disturbed about the issues and the possible distractions it could cause, but not really worried about CHK being bought or going down.

Of course, sometimes they could be the last to know. my nephew works there....he be watching the $$$ and the books.

[Skysooner]

CHK is in a lot of trouble actually. They have tons of land holdings that will go away without development in the near term. They also have a number of joint ventures that are also rolling off on outside capital in the next year hence the large funding gap. They do hold some great acreage but much of it is already joint ventured. They need cash in a big way. My company only has some issues with being almost a purely natural gas company, and we were even later to the party then CHK was. Still we have almost 3 billion in capital stored up and are doing everything to make the transfer over. We also are JVing lots of dry gas and liquids properties but only to the tune of getting it funded. We also have downside protection due to prudent hedges. CHK has none of that since they sold off most of their hedges for capital last year. Storage will be full by late July to late August depending on the amount of shut-ins and then there will be mandatory shut-ins until the winter.

[diverdog]

I know quite a few CHK people...some fairly high up. I don't get any sense of panic with them. They are disturbed about the issues and the possible distractions it could cause, but not really worried about CHK being bought or going down.

Of course, sometimes they could be the last to know.

Well that was my thinking until my company could killed by commercial loans and was sold. I will never ever believe senior management when things are down. Your friends would be wise to keep their options open.

[okie52]

Well that was my thinking until my company could killed by commercial loans and was sold. I will never ever believe senior management when things are down. Your friends would be wise to keep their options open.

Hopefully they were keeping their options open even during the good times, at least as long as you have options.

[okie52]

my nephew works there....he be watching the $$$ and the books.

As long as he is watching the money he probably knows what is going on more than most.

[okie52]

CHK is in a lot of trouble actually. They have tons of land holdings that will go away without development in the near term. They also have a number of joint ventures that are also rolling off on outside capital in the next year hence the large funding gap. They do hold some great acreage but much of it is already joint ventured. They need cash in a big way. My company only has some issues with being almost a purely natural gas company, and we were even later to the party then CHK was. Still we have almost 3 billion in capital stored up and are doing everything to make the transfer over. We also are JVing lots of dry gas and liquids properties but only to the tune of getting it funded. We also have downside protection due to prudent hedges. CHK has none of that since they sold off most of their hedges for capital last year. Storage will be full by late July to late August depending on the amount of shut-ins and then there will be mandatory shut-ins until the winter.

That's where Aubrey has always been necessary. He can raise capital and he can sell deals and usually have CHK come out smelling like a rose. The problem is that he not only waited too long to switch from NG to oil but he has never pulled in his horns...ever. He should probably sell off some of CHKs assets and reduce his debt ratio but I just don't know that he will do that unless he is absolutely forced to do it.

He has big cajunas...maybe too big sometimes.

[rainiersooner]

Screw him - give me back my Sonics!!!

Commence backlash in 3-2-1!!! :welcoming:

[TheHumanAlphabet]

From what I hear, Chesapeake is highly leveraged into the future, so much so, they may not have the cash flow to support all the leveraged wells they have. It requires the price of gas to be high and if it is unstable or drops more, they may be in trouble. I am not sure if they did this to pay now for more wells and drilling or if there is another reason. This is the major thing I have read that casues worry.

[Sooner5030]

Their balance sheet doesn't look that bad. They could have some liquidity problems in the future at worst but they have assets they can sell. I just don't think it is that bad. Mostly bad PR the last few days/weeks that maybe sheds some light the lack of adequate BoD oversight.

[cleller]

Seems like Aubrey either had too many irons in the fire, let things go to his head, or both. He's been buying land, wells, businesses, and either thing else like there's no tomorrow for years. Now with all the advances in gas exploration, the glut is killing him.

He's a victim of his own success. Maybe also his own excess.

[Petro-Sooner]

From what I hear, Chesapeake is highly leveraged into the future, so much so, they may not have the cash flow to support all the leveraged wells they have. It requires the price of gas to be high and if it is unstable or drops more, they may be in trouble. I am not sure if they did this to pay now for more wells and drilling or if there is another reason. This is the major thing I have read that casues worry.

Yep. With $2 natural gas. Good luck with that.

[pphilfran]

Seems like Aubrey either had too many irons in the fire, let things go to his head, or both. He's been buying land, wells, businesses, and either thing else like there's no tomorrow for years. Now with all the advances in gas exploration, the glut is killing him.

He's a victim of his own success. Maybe also his own excess.

That is how they get rich...they make huge bets in risky situations...

Sooner or later it bites most of them in the azz....

[Midtowner]

Screw him - give me back my Sonics!!!

Commence backlash in 3-2-1!!! :welcoming:

If only your city had supported your team like OKC has.

How's that arena coming? Still not done? K.

[TheHumanAlphabet]

A story from today's Houston Chronicle...

Sounds like Chessy may have significant worries...I would be very interested if I had their stock. (http://www.chron.com/business/article/Chesapeake-may-have-big-undisclosed-liability-3550192.php)

[OULenexaman]

Hummmm......it's gonna be a ride.

[Skysooner]

http://blogs.wsj.com/marketbeat/2012/05/11/chesapeake-how-to-lose-1-billion-in-46-minutes/?mod=yahoo_hs

This is what I was saying. 14% lost in the last 1.5 hours of trading.

[okie52]

http://blogs.wsj.com/marketbeat/2012/05/11/chesapeake-how-to-lose-1-billion-in-46-minutes/?mod=yahoo_hs

This is what I was saying. 14% lost in the last 1.5 hours of trading.

I'm kind of liking the buying opportunity.

[Skysooner]

I was thinking the same thing. Apparently Pickens sold all of his CHK in February. They might have to declare bankruptcy.

[okie52]

I was thinking the same thing. Apparently Pickens sold all of his CHK in February. They might have to declare bankruptcy.

Well I certainly hope not but I'm sure its possible.

[Sooner5030]

I just read their 10-Q release and their financial statements aren't that much different than year end 2011.

http://www.sec.gov/Archives/edgar/data/895126/000119312512228139/d333835d10q.htm#tx333835_1

3.9 billion in current assets compared to 6.6 billion in current liabilities is not good.....but not significantly different than year end 2011. Revenue for the qtr was up to 2.4 billion compared to 1.6 billion in the same period last year. Their qtr loss was 71 million compared to 205 million in the same period last year. I also noticed revenue from oil is increasing.

I think they just have to sell some assets to meet short term liabilities. The incident today sucks....the whole extension to not file and then filing really spooked some folks. What the hell were they thinking. I bet their f/s auditors are scared right now.

Anyway, based on the assets they have they could become a target soon for takeover.

[diverdog]

I just read their 10-Q release and their financial statements aren't that much different than year end 2011.

http://www.sec.gov/Archives/edgar/data/895126/000119312512228139/d333835d10q.htm#tx333835_1

3.9 billion in current assets compared to 6.6 billion in current liabilities is not good.....but not significantly different than year end 2011. Revenue for the qtr was up to 2.4 billion compared to 1.6 billion in the same period last year. Their qtr loss was 71 million compared to 205 million in the same period last year. I also noticed revenue from oil is increasing.

I think they just have to sell some assets to meet short term liabilities. The incident today sucks....the whole extension to not file and then filing really spooked some folks. What the hell were they thinking. I bet their f/s auditors are scared right now.

Anyway, based on the assets they have they could become a target soon for takeover.

How much cash do they have on hand?

[Sooner5030]

How much cash do they have on hand?

unrestricted was 438 million and they had about 2.5 billion in accounts receivable

[diverdog]

unrestricted was 438 million and they had about 2.5 billion in accounts receivable

Thanks I just got home and can see the balance sheet a lot better than on my iPhone. When did he take out these loans?

[Sooner5030]

CHK just bought itself some time. With $3 billion they can clear all current liabilities and if they sell ~$10 billion in assets they can at least make it til the prices go back up. I should have bought some with my mad money when it went under $15 today. It's already back up to $15.35 in after hours. Too bad I don't touch equity securities any more. <<<<this is not advice though.

http://finance.yahoo.com/news/chesapeake-energy-corporation-enhances-financial-231900259.html


OKLAHOMA CITY--(BUSINESS WIRE)--

Chesapeake Energy Corporation (NYSE:CHK - News) today announced it has entered into a $3.0 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jefferies Group, Inc. The net proceeds of the loan, after payment of customary fees and original issue discount (if any), will be utilized to repay borrowings under the company’s existing corporate revolving credit facility.

The new facility, which ranks pari passu to Chesapeake’s outstanding senior notes, matures on December 2, 2017 and may be repaid at any time this year without penalty at par value and carries an initial variable annual interest rate through December 31, 2012 of LIBOR plus 7.0%, which is currently 8.5%, given the 1.5% LIBOR floor in the loan agreement. During the remainder of the year, Chesapeake plans to complete asset sales totaling $9.0-$11.5 billion and intends to use a portion of the proceeds from these asset sales to repay the loan. Chesapeake has received strong interest from prospective buyers of its Permian Basin asset sales process and its Mississippi Lime joint venture process, and the company expects to complete these two transactions in the 2012 third quarter.

[diverdog]

CHK just bought itself some time. With $3 billion they can clear all current liabilities and if they sell ~$10 billion in assets they can at least make it til the prices go back up. I should have bought some with my mad money when it went under $15 today. It's already back up to $15.35 in after hours. Too bad I don't touch equity securities any more. <<<<this is not advice though.

http://finance.yahoo.com/news/chesapeake-energy-corporation-enhances-financial-231900259.html

Christ, they are paying out the wazoo for that loan. Libor plus 700 basis points. Yikes! And I believe the current 1 year Libor rate is 1.05%. There is someone at Goldy that had a really good day. I guess this is the corporate equivalent of a pay day loan.

[AlboSooner]

McClendon should have left the company a long time ago.

[Skysooner]

This is all dependent upon them making some sales. To raise that kind of money they need (around $10 B), they have to sell proved production and land. Their Permian properties do not sit in the real heart of the good plays going on there. They have some land assuredly, but they are going to have to give up their best proven stuff to raise the money they need. Layoffs coming.

[okie52]

This is all dependent upon them making some sales. To raise that kind of money they need (around $10 B), they have to sell proved production and land. Their Permian properties do not sit in the real heart of the good plays going on there. They have some land assuredly, but they are going to have to give up their best proven stuff to raise the money they need. Layoffs coming.

One thing Aubrey can do is sell.

[Skysooner]

One thing Aubrey can do is sell.

It will take more than that. The companies that can afford this are all great negotiators, and they all know the history of the joint ventures that CHK has done recently. Most haven't been great for the buyers. I'm right in the middle of one of these right now.

[sappstuf]

One thing Aubrey can do is sell.

He could sale a ketchup popsicle to a woman in white gloves..

[okie52]

It will take more than that. The companies that can afford this are all great negotiators, and they all know the history of the joint ventures that CHK has done recently. Most haven't been great for the buyers. I'm right in the middle of one of these right now.

He's turned a number of interests to tough buyers...ones often not in the oil and gas industry and gotten Chesapeake carried on their interest. If he is actually forced to sell prime acreage as in oil acreage there will be plenty of buyers

[Skysooner]

He's turned a number of interests to tough buyers...ones often not in the oil and gas industry and gotten Chesapeake carried on their interest. If he is actually forced to sell prime acreage as in oil acreage there will be plenty of buyers

The problem is the level of it. Most of their really good acreage is already tied up in a joint venture. They have others no doubt, but the company outgrew its ability to HBP the acreage it bought. I actually could see Exxon coming in and buying the whole thing up. My company might be interested in some of the Permian acreage. No doubt they are between a rock and a hard place, and his image has suffered immensely. Much harder to sell something when the buyer knows you have hidden things in the past.

[okie52]

Exxon already got its foot in the door on domestic production with xto...I doubt they are going to do it again with Chesapeake.

Is chesapeakes play in the eagleford tied up? Their position there should generate some coin.

[Skysooner]

Exxon already got its foot in the door on domestic production with xto...I doubt they are going to do it again with Chesapeake.

Is chesapeakes play in the eagleford tied up? Their position there should generate some coin.

http://www.eaglefordshale.com/companies/chesapeake-energy/

We already have word Exxon is working on it. As you said doubt they do anything with XTO, but they could likely buy the whole company for $15 B right now.

[okie52]

http://www.eaglefordshale.com/companies/chesapeake-energy/

We already have word Exxon is working on it. As you said doubt they do anything with XTO, but they could likely buy the whole company for $15 B right now.

My point about xto was that xto was about like chk in how it is heavily weighted to ng production....to add chk would further exacerbate the situation.

Exxon moving fast on anything makes me laugh

[Skysooner]

My point about xto was that xto was about like chk in how it is heavily weighted to ng production....to add chk would further exacerbate the situation.

Exxon moving fast on anything makes me laugh

Actually this has been in the work for months. Exxon would buy CHK for their oil acreage. They have a ton in the Utica.

[okie52]

Actually this has been in the work for months. Exxon would buy CHK for their oil acreage. They have a ton in the Utica.

Yes they do...but Exxon moving fast to do anything domestically is humorous...I'm sure Aubrey could move a little faster.

[Skysooner]

Yes they do...but Exxon moving fast to do anything domestically is humorous...I'm sure Aubrey could move a little faster.
Aubrey has lost all credibility and this is only what is publicly known. I know Aubrey fairly well, and this kind of problem is something he doesn't specialize in. CHK might survive but only with big layoffs, selling lots of assets and under the control of a financial head.

[okie52]

Aubrey has lost all credibility and this is only what is publicly known. I know Aubrey fairly well, and this kind of problem is something he doesn't specialize in. CHK might survive but only with big layoffs, selling lots of assets and under the control of a financial head.

Aubrey hasnt lost "all credibility". That's just nonsense. Has his image taken some hits..sure. This is the guy that almost singlehandedly built one of the largest companies in America in the last 20 years. What is his crime...being too big of a gambler? Hell, there are a lot people doing poorly because ng is at $2 an MCF. Put ng at $6 an MCF and there would be a whole lot less squawking.

He11, this is what Aubrey has been doing for the last 3 years...staying one step ahead of the creditors. Chk was almost bankrupt in the 90s when he pulled them out. and it was Aubrey (and ward) that pulled them out.

So you know Aubrey fairly well...

[Skysooner]

Actually yes I do. I am a second generation oil man from Oklahoma, and I have been around him off and on for 20 years. I am not trying to tear him down, but people in Business Development roles mistrust anything to do with Chesapeake and the latest revelations don't help. We don't like doing business with companies that we think we can't trust. Also the results of companies that have done deals with CHK recently haven't been stellar. Again it makes us mistrust data etc they submit. There are lots of things I know that I can't share here, but it is very worrying.

[okie52]

Actually yes I do. I am a second generation oil man from Oklahoma, and I have been around him off and on for 20 years. I am not trying to tear him down, but people in Business Development roles mistrust anything to do with Chesapeake and the latest revelations don't help. We don't like doing business with companies that we think we can't trust. Also the results of companies that have done deals with CHK recently haven't been stellar. Again it makes us mistrust data etc they submit. There are lots of things I know that I can't share here, but it is very worrying.

The deals are what I'm talking about. Aubrey offers you a piece of the Utica or eagleford at a reasonable promote and you wouldn't take that deal? He11, I expect a company to do its homework about the reserves, acreage prices, drilling costs, etc... Have you seen problems with Chesapeake operating a well vs someone else?

[Skysooner]

Actually yes I do. I am a second generation oil man from Oklahoma, and I have been around him off and on for 20 years. I am not trying to tear him down, but people in Business Development roles mistrust anything to do with Chesapeake and the latest revelations don't help. We don't like doing business with companies that we think we can't trust. Also the results of companies that have done deals with CHK recently haven't been stellar. Again it makes us mistrust data etc they submit. There are lots of things I know that I can't share here, but it is very worrying.

The deals are what I'm talking about. Aubrey offers you a piece of the Utica or eagleford at a reasonable promote and you wouldn't take that deal? He11, I expect a company to do its homework about the reserves, acreage prices, drilling costs, etc... Have you seen problems with Chesapeake operating a well vs someone else?

Chesapeake is a very good operator, and they have a good geology staff and exceptional land staff. The main issue regards the credibility of their reserves and reservoir engineering staff. You can always count on them to tout their acreage as the best. In the Utica they are right. In the Permian and Haynesville not so much. When you can't trust a company's ability to use classic reservoir engineering technology along with newer techniques then you can't trust them. OU petroleum engineering won't allow them to participate in research consortiums anymore due to issues with ethics. I just can't believe anything they say except we will take a closer look if we hear they are leasing.

I guess the main issue I have is that a CEO should be entirely transparent in what he says and does. When the top guy is using questionable judgement then the rest of the organization is suspect.

Also cash flow is a huge issue here as well. If you JV and don't operate and the other company doesn't have the cash flow to support drilling obligations it significantly impacts IRR % and PIR. Many of their JVs cash promotes are ending. This is a highly complex company to evaluate which is why buying them out is a big issue. All you can really do unless you have a ton of financial to throw at the analysis is just go for one of their deals they are selling.

[okie52]

Chesapeake is a very good operator, and they have a good geology staff and exceptional land staff. The main issue regards the credibility of their reserves and reservoir engineering staff. You can always count on them to tout their acreage as the best. In the Utica they are right. In the Permian and Haynesville not so much. When you can't trust a company's ability to use classic reservoir engineering technology along with newer techniques then you can't trust them. OU petroleum engineering won't allow them to participate in research consortiums anymore due to issues with ethics. I just can't believe anything they say except we will take a closer look if we hear they are leasing.

I guess the main issue I have is that a CEO should be entirely transparent in what he says and does. When the top guy is using questionable judgement then the rest of the organization is suspect.

Also cash flow is a huge issue here as well. If you JV and don't operate and the other company doesn't have the cash flow to support drilling obligations it significantly impacts IRR % and PIR. Many of their JVs cash promotes are ending. This is a highly complex company to evaluate which is why buying them out is a big issue. All you can really do unless you have a ton of financial to throw at the analysis is just go for one of their deals they are selling.

I would think that anyone buying a JV from chk would contractually secure the right to operations should chk fail or be unwilling to continue as operator. Of course that would require the purchaser to be capable of operating and thereby narrows the field of who the buyers might be.

[Skysooner]

I would think that anyone buying a JV from chk would contractually secure the right to operations should chk fail or be unwilling to continue as operator. Of course that would require the purchaser to be capable of operating and thereby narrows the field of who the buyers might be.

That's the big issue for us. Cash flow and dividends. If we had to acquire additional interest to continue, we could operate, but we might not have the cash flow until 2014 to do something. I'm actually working on this issue with our company. We are doing stochastic modeling of acquisition opportunities, JV opportunities, greenfield leasing and accelerated drilling in our existing exploration plays to see what gives us the least risky chance of continuing to exist as a company without what is happening to Chesapeake.

[Skysooner]

http://www.ft.com/intl/cms/s/0/77e7428c-9b62-11e1-b097-00144feabdc0.html#axzz1uoPXB2Gy

Not looking good for Aubrey.

[okie52]

http://www.ft.com/intl/cms/s/0/77e7428c-9b62-11e1-b097-00144feabdc0.html#axzz1uoPXB2Gy

Not looking good for Aubrey.

I'm not a subscriber.

[Skysooner]

Neither am I. Direct linked through yahoo finance.

[cleller]

http://www.ft.com/intl/cms/s/0/77e7428c-9b62-11e1-b097-00144feabdc0.html#axzz1uoPXB2Gy

Not looking good for Aubrey.

It basically says that CHK got a $3 Billion loan to keep itself liquid and hopefully restore some confidence. Another link in the story says the loan is from Goldman Sachs, with a rate 7 points above the London bank rate.
So there's a further drain/commitment on their operation.

There was also a very good interview with Aubrey in the WSJ about a couple weeks ago. He's defiant and charismatic as always. Not sure if it will open either, but a fun read.

http://online.wsj.com/article/SB10001424052702304811304577369663811298168.html?m od=hp_opinion

[Skysooner]

I couldn't cut and paste the article I wanted and apparently coming directly to it triggers an online request. The one I wanted to post talked about the new chairman coming in and looking at takeover offers or remaining independent and whether Aubrey should be the one running the company. There have also been calls from major shareholders to sell the company outright. Carl Icahn has apparently stepped in with a stake which might restore some confidence.

[okie52]

I couldn't cut and paste the article I wanted and apparently coming directly to it triggers an online request. The one I wanted to post talked about the new chairman coming in and looking at takeover offers or remaining independent and whether Aubrey should be the one running the company. There have also been calls from major shareholders to sell the company outright. Carl Icahn has apparently stepped in with a stake which might restore some confidence.

I thought Icahn sold his stock in CHK...is this something new?

[Skysooner]

I thought Icahn sold his stock in CHK...is this something new?

Yes, he is supposedly getting back in and announcing just how much today.

[okie52]

Yes, he is supposedly getting back in and announcing just how much today.

Last night on the news it was stated that CHK was going to make an announcement this morning. I haven't heard it yet.

[Skysooner]

There are some articles on a conference call he had this morning. Nothing new except they are delaying a VPP on their Eagle Ford acreage but still going on with the Permian lease sale. They say their assets are worth $50-$60 B after the sale, but I'm not sure I totally believe it. You know how those numbers can be manipulated.

[Skysooner]

http://wallstcheatsheet.com/stocks/whats-moving-these-hot-stocks-leadership-changes-and-new-production-ahead.html/#

Chesapeake Energy Corporation (NYSE:CHK): According to the Wall Street Journal, Chesapeake Energy expects activist investor Carl Icahn to announce having taken a notable stake in the natural gas company, which has experienced troubled times of late. Chesapeake Energy shares traded up $1.52 (10.26%) at $16.33 recently.

[okie52]

There are some articles on a conference call he had this morning. Nothing new except they are delaying a VPP on their Eagle Ford acreage but still going on with the Permian lease sale. They say their assets are worth $50-$60 B after the sale, but I'm not sure I totally believe it. You know how those numbers can be manipulated.

Well one factor would be what price (long term and short term) they are putting on gas and oil...as you know that can be highly subjective.

[okie52]

http://wallstcheatsheet.com/stocks/whats-moving-these-hot-stocks-leadership-changes-and-new-production-ahead.html/#

Chesapeake Energy Corporation (NYSE:CHK): According to the Wall Street Journal, Chesapeake Energy expects activist investor Carl Icahn to announce having taken a notable stake in the natural gas company, which has experienced troubled times of late. Chesapeake Energy shares traded up $1.52 (10.26%) at $16.33 recently.

I knew I should have bought on Friday.

[The Profit]

Having Icahn enter the picture is not a good thing for anyone, who likes the current Chesapeake. I would not want to be one of the company's recent hires. Personally, I would like to see McClendon survive. I think he is a visionary, and important to OKC's continued growth as a city.

[pphilfran]

Yep...Icahn is going to look after Icahn...

[okie52]

Having Icahn enter the picture is not a good thing for anyone, who likes the current Chesapeake. I would not want to be one of the company's recent hires. Personally, I would like to see McClendon survive. I think he is a visionary, and important to OKC's continued growth as a city.

Hear, Hear!!!

Icahn was a stockowner before. Yeah, I didn't like it the first time he owned given his raider past. Of course TBoone owned too and sold his interest in February.

I hope that CHK makes a full recovery but Aubrey is really going to have to do some selling.

[Skysooner]

Hear, Hear!!!

Icahn was a stockowner before. Yeah, I didn't like it the first time he owned given his raider past. Of course TBoone owned too and sold his interest in February.

I hope that CHK makes a full recovery but Aubrey is really going to have to do some selling.

We were all talking about this today since we are looking at their Permian properties. There is no way we would do a JV with Chesapeake for reasons I talked about previously (namely cash flow). Now buying them out of the play is a possibility. I'm only peripherally involved with it although one of my direct reports is the primary engineer on it (she is working through another group right now).

[okie52]

We were all talking about this today since we are looking at their Permian properties. There is no way we would do a JV with Chesapeake for reasons I talked about previously (namely cash flow). Now buying them out of the play is a possibility. I'm only peripherally involved with it although one of my direct reports is the primary engineer on it (she is working through another group right now).

Your cash flow? What would be the anticipated turnaround time on an oil investment in the Utica/Eagleford/permian?

[Skysooner]

Your cash flow? What would be the anticipated turnaround time on an oil investment in the Utica/Eagleford/permian?

You can become cash flow positive within 12-18 months after drilling. The problem comes if there are competing capital needs within the company. We are stretched thin as it is, and 2013 is going to be a challenging year. After 2013, the normal drilling cycle will cause this to be a non-issue (hopefully).

[okie52]

You can become cash flow positive within 12-18 months after drilling. The problem comes if there are competing capital needs within the company. We are stretched thin as it is, and 2013 is going to be a challenging year. After 2013, the normal drilling cycle will cause this to be a non-issue (hopefully).

I hope so too Sky-maybe we'll have that $4 an MCF by late 2013.

What are the futures running for ng a year out?

[Skysooner]

I hope so too Sky-maybe we'll have that $4 an MCF by late 2013.

What are the futures running for ng a year out?

$4.06 for Jan 2014.

BTW, the real consensus here now is that Romney should replace Obama. Huge turnaround from 4 years ago.

[okie52]

$4.06 for Jan 2014.

BTW, the real consensus here now is that Romney should replace Obama. Huge turnaround from 4 years ago.

That would fit with your projections.

I'm guessing your company and some others (maybe Aubrey too) that might have slightly supported Obama were thinking Cap and Trade was going to be good for the NG companies since it would be taxed lower than the other hydrocarbons and push more of the market to its usage.

But I'm glad to hear the shift.

[cleller]

Read in a post on the South Oval that Aubrey's loans were possibly for CNG fueling stations. This helped to make sense of some of the mess for me. Can't believe I hadn't heard it before.
I have wondered who was going to get the ball rolling for CNG engines. Sounds like something Aubrey would be involved in.

[diverdog]

Read in a post on the South Oval that Aubrey's loans were possibly for CNG fueling stations. This helped to make sense of some of the mess for me. Can't believe I hadn't heard it before.
I have wondered who was going to get the ball rolling for CNG engines. Sounds like something Aubrey would be involved in.

T Boone?

[diverdog]

$4.06 for Jan 2014.

BTW, the real consensus here now is that Romney should replace Obama. Huge turnaround from 4 years ago.

I am in a wait and see mode. I liked him when he was a NE Republican.

[Skysooner]

I agree. I still lean Obama myself but primarily on social issues at this point.

[The Profit]

From Reuters:

By Jessica Toonkel and Matthew Robinson

NEW YORK, May 15 (Reuters) - The woes of Chesapeake Energy Corp are hitting shareholders hard, including its employees.

Thousands of Chesapeake workers have retirement portfolios that are heavily invested in Chesapeake stock, which has declined sharply following revelations about Chief Executive Aubrey K. McClendon's business dealings.

But while retail and institutional investors have sold the stock, employees don't always have that option.

Overall, 38 percent of Chesapeake Energy's Savings & Incentive Stock Bonus Plan - the only 401(k) plan available to the majority of the firm's employees - is in company stock, far above the 10 percent many plan consultants advise.

Currently, Chesapeake says about 4,000 employees are restricted from selling shares the company puts into their retirement portfolios to "match" the employee's own contribution in the plan.

Most companies stopped offering 401(k) matches in stock after the 2001 collapse of Enron Corp, where employees were unable to sell their shares as the company went bankrupt.

Despite regulatory reforms aimed at reducing worker exposure to employer stock, Chesapeake is among a minority of companies that still offer 401(k) matching contribution in shares, highlighting the risk of tying a worker's nest egg to an employer's success.

Chesapeake's stock had dropped almost 40 percent to $15.52 at Monday's close since its high this year of $25.58 in March. The shares were down nearly 7 percent on Tuesday, hit by a rating downgrade and word the company had increased a new bridge loan.


"Employees are naturally worried," said Greg Womack, an Edmond, Oklahoma-based financial adviser who says he has been fielding calls from concerned Chesapeake employees. "If the stock doesn't recover, this is a substantial part of people's retirement."

Chesapeake's retirement plan, to be sure, has been a generous one, and helped put the Oklahoma City-based company on Fortune's 100 Best Places to Work since 2008.

The company matches every dollar a salaried employee invests in the 401(k) plan - up to 15 percent of an employee's salary - with shares of stock. That's more than three times the typical match.

Stock matching programs help companies keep employee interests aligned with corporate goals. They also offer big tax benefits and substantial financial savings to companies.

Out of more than 13,000 employees, the 4,000 workers who cannot sell shares in the stock plan only represent 5 percent of the plan assets, said Michael Kehs, a Chesapeake spokesman, who declined to give total assets in the plan or plan details.

Those 4,000 employees are newer employees, who likely are making small contributions to the plan, thus accounting for the 5 percent, said Don Stone, managing partner of Chicago-based Plan Sponsor Advisors, a plan consultant.

"But just because they may have small balances in their 401(k) plans doesn't change the fact that it could be a big percentage of those employees' money," Stone said.

According to a Chesapeake's 2010 filing on its 401(k) plan, which is the latest available, the plan had $490 million in assets as of Dec. 31, 2010. The firm's 149 union employees are offered a different 401(k) plan that matches employees' contributions in cash - 50 cents for every dollar up to 4 percent of employees' salaries, Kehs said.

Chesapeake requires employees in its retirement plan to hold stock for the maximum amount of time allowed by law: until they have been employed for three years or have reached age 55.

"Chesapeake has created a fairly volatile situation here," said Greg Ash, a partner at Kansas City-based Spencer Fane Britt & Browne LLP, which represents employers on retirement plan issues.

"In an industry in which the stock price can go up and down quickly and especially with all of the recent headlines, I would hope they are talking about removing the three-year lock in (for the employee match)," said Ash.

Chesapeake's workers can invest their own contributions in company stock or in an array of more than 28 investment options, according to BrightScope, which tracks 401(k) plans and rates the plan above-average compared to its peers.

Chesapeake says 95 percent of the plan assets and 98 percent of the vested plan assets can be diversified.

On average, employers match worker contributions up to 3 to 4 percent of their salary, almost always with cash, according to plan consultants. Some companies offer slightly more.

Only 12 percent of companies provide a company stock match, down from 45 percent in 2001, according to benefits consultancy Aon Hewitt. And only 1.2 percent of plans that give a match in company stock do not allow employees to sell that stock immediately.

Three former employees interviewed by Reuters said they still held Chesapeake shares and were holding onto their stock with the hope that it would rebound.

For others, what was once an attractive perk doesn't seem that way anymore.

"At the time, I viewed it as a company putting their money where their mouth is," said one former employee, who has left the company.

Now that he's in his thirties and has a family, he said he would not be as comfortable with the idea.

Many companies offer an Employee Stock Ownership Plan (ESOP) inside a 401(k) - which is what Chesapeake offers - and supplement it with another kind of retirement benefit plan to provide employees more diversification, according to Michael Keeling, president of the Employee Stock Ownership Plan Association, a trade group. But there is no additional plan available for non-union employees at Chesapeake.

EDUCATIONAL EFFORTS

Chesapeake "routinely reviews the plan design and investments taking into account all Internal Revenue Service and Department of Labor guidelines," the company spokesman said in an email to Reuters.

Principal Financial Group runs the company's financial literacy education program. According to Principal documents about the program supplied to Reuters by Chesapeake, the company regularly sends educational materials about its 401(k) plan to employees that emphasize the need to diversify.

Five former employees interviewed by Reuters agree that the company makes concerted efforts to educate plan participants.

Despite these efforts, more than one-third of Chesapeake's plan remains in company stock, down from a high of 77 percent in 2005, but still way above industry average.

The average 401(k) plan had 11.4 percent in company stock at the end of 2010, down from 13 percent in 2009, according to an Aon Hewitt survey of 401(k) plans that, in total, served more than 12 million employees.


LITIGATION LIABILITIES

From 1997 through July 2010, 211 class action lawsuits were filed against employers over company stock, according to Cornerstone Research.

While these cases tend to be dismissed or settled, the threat of a suit and the bad publicity and legal hassles that come with it has led many companies to stop offering stock matches, said Bill McClain, a consultant for Mercer who advises 401(k) plans.

"If you have major movement in the company stock it could be very well made into a lawsuit," McClain said.

But it could be hard to get traction for litigation, given that Chesapeake's 401k plan is an ESOP.

In a regular 401(k) plan with a company stock fund, it would be easier to make a case that the plan should have removed the stock fund if the stock fell dramatically, said Elizabeth Nedrow, a partner at Holland & Hart LLP, who represents employers in these cases.

"That argument is harder to make with an ESOP because by statute there is a presumption that the plan is supposed to invest in company stock," Nedrow says.

[OULenexaman]

I agree. I still lean Obama myself but primarily on social issues at this point. name one...

[pphilfran]

name one...

Wrong thread

[OULenexaman]

Sky posted it...here.

[pphilfran]

Sky posted it...here.

Give us a break..this has been a reasonable thread....no need to take it into the sewer with the others...

[dwarthog]

With the attention being given to fracking and what has the appearance of an all out push to reign that practice in via any method necessary, I have to wonder how that is going to affect Chesapeake and the natural gas industry in general.

[OULenexaman]

Give us a break..this has been a reasonable thread....no need to take it into the sewer with the others... no problem.....but I wasn't the plumber that laid this line....

[Skysooner]

I was responding to another. This thread has been good so far, and obviously we will never agree on the other given your response.

[OULenexaman]

I know....can't name one myself......so have we ever found out how much Icahn bought? I still haven't seen it anywhere.

[pphilfran]

As of yesterday....nuttin...

http://news.yahoo.com/no-sign-yet-carl-icahns-chesapeake-stake-232918865--sector.html

[Skysooner]

Their stock price was down another 5% yesterday. They had to borrow another $1 B against the line from Goldman Sachs and Jeffries.

[OULenexaman]

That would explain Icahn being on hold.....greedy bastard......pretty easy to read what his plans are here.

[The Profit]

Icahn will wait until he thinks the stock has reached its lowest point, and then he will work a plan to buy a controlling share. At that point, it will be a very different Chesapeake.

[pphilfran]

Icahn will wait until he thinks the stock has reached its lowest point, and then he will work a plan to buy a controlling share. At that point, it will be a very different Chesapeake.

The wolves are circling...or is it sharks?

[The Profit]

In the case of Icahn, turds is the appropriate noun.